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SMMT: Car dealers became the lenders in 2013

John Leech, KPMG UK head of automotive, comments on the UK new car sales registrations published by the SMMT today:

“UK new car sales in 2013 were the highest for five years fuelled principally by cheap credit from car manufacturers.

"The real story in 2013 has been the success of the Personal Car Plan (“PCP”) offered by car manufacturers – indeed the way the British buy cars has been truly transformed. Gone are the days where the consumer asks the bank for a personal loan. Car dealers now sell finance with the car where half the price is paid over 36 months and the remaining half is cleared by a bullet payment at the end of the 3 years. This has been great for new car sales as consumers choose to take a new car on another PCP rather than pay the bullet. However, the danger for car manufacturers and used car dealers is that the supply of three year old cars is starting to ramp up and, maybe in a year or two from now, will exceed demand leading to a potential residual value price crash and increased risk of loan default by consumers.”

KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with approximately 11,500 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2013. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 155,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

KPMG International Cooperative ("KPMG International") is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.